S&P downgrades Treofan

Standard & Poor's said it lowered its long-term credit ratings on Treofan Holdings GmbH and operating subsidiary Treofan Germany GmbH & Co. KG to CCC+ from B- and placed the ratings on CreditWatch with negative implications.

The recovery rating on Treofan Germany's €170 million subordinated second-lien notes remains unchanged at 3, indicating meaningful (50% to 70%) recovery prospects for noteholders.

The agency said the negative rating actions reflect its concerns about the company's increasingly weak liquidity and the uncertainty over whether Treofan will be able to maintain sufficient liquidity to cover its near-term needs.

Treofan's management is seeking access to a €20 million incremental commitment to the existing €60 million availability under the revolving credit facility. Failure to access this incremental commitment could very likely trigger a liquidity shortfall and accelerate a default in the near term, S&P said, adding that even if Treofan obtains the incremental commitment, its liquidity is likely to remain very tight given operational challenges, high cash interest costs, only modest flexibility in curtailing maintenance capital expenditures spending and restructuring cash outflows related to the new restructuring program.

For the 12 months to Sept. 30, the ratio of pension- and operating lease-adjusted cash debt to adjusted EBITDA was 7.9x.

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